Builders Licence Lending – don’t do it!
Entry into the building profession is not granted unless a person has the appropriate qualifications, skills and experience, and has undergone a series of probity checks with the relevant licensing authority.
Given the rigorous requirements for obtaining a building licence or registration, it is hard to imagine that a building practitioner would knowingly (or carelessly) allow another to use those credentials for building work that is not undertaken or properly supervised by the licensed practitioner.
If you’re considering lending your hard-earned licence to somebody else, don’t! Read on to find out why.
What is licence lending?
Licence lending (or misuse of a licence) can occur in various circumstances however is often undertaken for profit, under a ‘licence lending scheme’. This generally involves a registered builder allowing another party (usually unlicensed or insufficiently licensed) to use the licence or registration to obtain insurance, a building permit, enter a building contract, and / or carry out building works.
The actual licence holder does not usually have any involvement in the project and does not supervise the building work.
Less culpable (yet careless) forms of licence lending may occur to help out a ‘mate’’ who may be struggling to obtain appropriate insurance or may not be sufficiently qualified to secure a particular job.
No matter what the circumstances, allowing other parties to use a licence or registration that is not their own is reckless and may come at considerable costs.
What are the risks?
Building laws and regulations across various jurisdictions provide for a range of offences relating to unlicensed or unregistered building matters. Penalties apply for both the person lending the licence and the person using the licence.
Offences include, but are not limited to:
- carrying out building work without being properly licensed or registered;
- knowingly engaging an unlicensed or unregistered contractor;
- allowing another party to misuse a licence or registration;
- falsely claiming to hold a certain licence or registration.
Depending on the offence and a person’s culpability, penalties can be in excess of $100,000 with some more severe offences carrying potential imprisonment.
In addition to statutory offences under building legislation, parties involved in licence lending may breach Australian Consumer Laws for misrepresentation, misleading and deceptive conduct.
Builders who breach certain provisions of building legislation also provide grounds for the relevant authorities to investigate their conduct. This may lead to the issue of fines, suspensions and cancellations, substantially compromising a builder’s future career and business prospects.
Following are two examples to illustrate some of the implications for participants of licence lending. These cases also demonstrate the sometimes, grey areas of responsibility when entering a joint venture and reiterate the importance of clear lines of communication, supporting documentation and proper supervision for all projects to which a builder’s name, licence or registration is attached.
Hill v Bastecky  VCAT 2663
This case concerned a ‘sham contract’ prepared by a third-party corporate entity who used the registration details of a building practitioner (Mr Bastecky) to obtain home warranty insurance and enter into a domestic building contract with homeowners, Mr and Mrs Hill. Other than ‘lending’ his licence to the company, Mr Bastecky was not otherwise involved in the building work.
The company subsequently became insolvent and the insurer refused to cover the owners for their claim on the basis that it had been misled into entering the insurance contract. The homeowners sought relief by holding Mr Bastecky liable, proceeding through the Victorian Civil and Administrative Tribunal (VCAT).
On the facts, the Tribunal did not attribute contractual liability to Mr Bastecky. It did however consider the transaction a ‘scam’ involving misleading and deceptive conduct in breach of the (then) Fair Trading Act 1999 and Mr Bastecky was held liable for damages suffered by the owners.
Misleading and deceptive conduct is an offence under various state laws as well as the Commonwealth Australian Consumer Law.
Theodor v Noonan (Building and Property)  VCAT 1390
In this case a registered builder (Mr Noonan) allowed a third-party builder to use his registration and other details on a building contract stated to be made between Mr Noonan and homeowners (Mr and Mrs Theodor). Mr Noonan’s registration details were also used to acquire the necessary insurance. The contract was signed by a third party (Mr Prendergast) ‘on behalf of’ Mr Noonan.
The homeowners terminated the contract, essentially due to delays in progress of the works, and arranged for the project to be completed through another party.
Mr Pendergrast later died unexpectedly, and Mr and Mrs Theodor sought damages from Mr Noonan for $160,979.41 which included the costs to have the work completed, lost rent and expert’s fees.
On the facts, the Tribunal concluded that a joint venture existed between Mr Noonan and Mr Pendergrast. Mr Noonan’s conduct was sufficient for the Tribunal to find that he ‘authorised’ Mr Pendergrast to act as his agent. As a consequence, a contract existed between Mr Noonan and the homeowners despite him having no involvement in the building work. Mr Noonan was found to be responsible to the homeowners for the building work under the contract.
The Tribunal was not hesitant in holding Mr Noonan liable, stating:
‘Mr Noonan is a registered domestic builder. He entered into a domestic building contract drafted in accordance with the Domestic Building Contracts Act 1995 (Vic). He is bound by the contract as the builder.
It does not matter, in my view, that Mr Noonan did not personally perform or direct the works.’
Protecting your hard-earned building licence and registration is critical to stay in the building industry and avoid significant financial and reputational loss. Even a decision to just ‘help out a mate’ can have disastrous consequences.